Retroactivity of FEHA Amendment Imposing Liability on Employer for Sexual Harassment by Nonemployees is Subject of Conflict Among Lower Courts.

Historically, there has never been any dispute that sexual harassment, when allowed to occur in the workplace, violates the California Fair Employment and Housing Act (“FEHA”). But what if the employee-victim is being harassed by a person who is not an employee, such as an employer’s customer or client? Can liability be imposed on the employer in these circumstances? Until the legislature amended FEHA in 2003, this question was a subject of conflicting opinions by the courts. Some courts, after construing the pertinent FEHA provisions, concluded that FEHA imposed liability on employers only when the harassment is by the employer’s agents or supervisors, or by employees whom the employer knew or should have known were engaging in the harassment. Other courts concluded that because FEHA expressly outlawed harassment by “an employer, labor organization, employment agency, apprenticeship training program or any training program leading to employment, or any other person,” then liability could be imposed on employers who fail to act reasonably to prevent harassment by their clients or customers.

In 2003, the legislature acted to resolve this issue. It amended FEHA section 12940(j), which now provides that “[a]n employer may …be responsible for the acts of nonemployees, with respect to sexual harassment of employees…in the workplace, where the employer, or its agents or supervisors, know or should have known of the conduct and fails to take immediate and appropriate corrective action.” The amendment further provides that “[i]n reviewing cases involving the acts of nonemployees, the extent of the employer’s control and any other legal responsibility which the employer may have with respect to the conduct of those nonemployees shall be considered.” While the amendment appears to be a clear expression by the legislature that FEHA imposes liability on employers for sexual harassment of employees even when the harassment is by nonemployees, the remaining question yet to be definitively determined is whether the amendment applies retroactively.

Recently, a state appeals court, in Carter v. California Department of Veterans Affair, held that the amendment constitutes a departure from prior law such as to preclude its retroactive application. The Carter case, which issued on August 17, 2004, conflicts with the holding in another case, Salazar v. Diversified Paratransit, Inc. (2004) 117 Cal.App.4^th 318, which noted that the legislature, when passing the amendment, expressly declared that it was not making new law but was merely clarifying existing law. The Carter court concluded that Salazar was incorrectly decided because the court in that case “did not fully analyze the language and context of the amendment.” While conceding that the legislature intended for the amendment to apply retroactively, the Carter court further held that retroactive application was “constitutionally objectionable” because “the import of the amendment [was] to impose substantial new obligations on employers, and to impose such liability, without clear notice, for conduct which was already completed in the past.”

We will continue to follow these developments to determine whether the State Supreme Court resolves the conflict.

Persons wishing further information or who have questions or comments about either this case or any of the cases that have appeared on this website can contact any of the attorneys at Epstein, Turner & Song.